Speech by President Barroso at the Alpbach Economic Symposium: "Overcoming the Crisis by Strengthening Europe"

Alpbach Economic Symposium/Alpbach

30 August 2012

President of the Alpbach Forum Fischler,

Chancellor Faymann,

Vice Chancellor Spindelegger,

Ministers,

Excellencies,

Distinguished guests,

It is a real pleasure to be here at Alpbach participating in a forum renowned for its input to the debate on Europe.

Otto Molden and the co-founders of this forum are figures with whom I can identify through their sense of justice, their fight for democracy and freedom, their vision of a better, co-operative European future. At the same time, I can only marvel at their courage.

The great men who inspired this Forum have left a great legacy which is deeply rooted in Europe's values: an event to meet across borders, to discuss, and even to disagree - but all within a truly European framework.

I have been asked to speak today about the current crisis and our strategy to overcome it and strengthen our Union.

This beautiful place is in many ways an appropriate setting. Over the last few years, Europe has resembled a group of hikers in the mountains: having reached a high ridge, with grand horizons around, the reaction has been to turn back and look at the achievement of getting so far. However, in looking backwards we failed to see the storm ahead.

In fact we have suffered from not one storm but at least three: the debt crisis touching states, banks and businesses; secondly, the financial sector crisis, including some intolerable practices; and thirdly a loss of competitiveness of some of our Member States.

Exposed to these elements we need to rope up, act as one, and, with resolve, find the path to our destination.

Ladies and gentlemen,

What distinguishes this crisis from previous ones in history is that we have the European Union as our shield that can protect us from these storms. In fact, we are already more integrated than before. All the steps so far taken to combat the crisis have resulted in more European integration, not less.

Our European path out of the crisis has two tracks, stability and growth. In the last year the political pendulum and public opinion has swung from focusing on stability to seeing growth as the primary objective.

However, to say that we need one and not the other ignores the fact that the two must co-exist if we are to exit the crisis. Without stability there is no confidence about the future, no investment and no growth. But equally if there is no confidence in the future, it is difficult to achieve stability now.

The real challenge which Europe has faced has therefore been to deliver short-term stability while at the same time developing a vision of Europe for the future, a Europe which delivers sustainable growth and employment and defends our values and our social model. Moreover, we must do all of this in a rapidly changing world.

We are on the path to achieving this. But it remains a rocky path. Let me just focus on the last meeting of the European Council in June.

This was a very important meeting; a meeting which took decisions that opened up the prospect of a more united, more integrated Union. Unfortunately, the communication after the Summit also showed the temptation to have European decisions but national, contradictory implementation.

Why do we need a more united and integrated Europe? Because we have monetary union, but the crisis has demonstrated that there is a cumulative logic to the integration process: monetary union cannot function without a financial and banking union, and without further fiscal and economic union. The last European Council endorsed a paper prepared by the President of the European Council in collaboration with myself, the President of the European Central Bank and the President of the Euro group, examining how best to move along this path.

Of course the logic of integration cannot be purely economic. Banking union requires a single European supervisor; further economic union too requires joint European supervision of the Member States economic policies. It is therefore logical, but it is also right and just, that there is further political integration as well. This is needed to ensure democratic oversight of the process and to reassure the citizens of Europe that this is not just a project by the political and economic elites.

This is the route up the mountain. Some say there is another way; we could retreat down the valley, or at least take shelter half-way. I would disagree with that. We cannot simply stay where we are or even try to retreat to the status quo ante.

First, the world has changed and we need to change too, to meet this competition. Second, just as there is a cumulative logic to integration, there is a cumulative logic of disintegration: the advantages which we take so much for granted - sometimes even too much for granted, risk being lost: achievements for our citizens such as the free movement of people, our internal market, our social rights and trans-European solidarity could unravel.

Ladies and gentlemen,

The European Commission will, on the 12th of September, table proposals to create a European banking union. This is the next concrete and immediate deliverable of our vision to generate confidence in the future of the Euro area. This is action now – even if deeper economic integration does of course require a longer perspective.

Europe needs fiscal consolidation, deep structural reform and smart targeted investment if we are to return to long term growth and create the jobs our citizens need.

At the last European Council, it was clear that much has already been done in terms of fiscal consolidation; on average deficits are falling across the European Union. This is not just an abstract concept - higher deficits mean greater debt servicing which in turn crowds out investment. Every Euro spent on debt is a Euro lost for smart investment.

Second, all leaders agreed that deep structural reform must continue. The European Commission is now producing yearly country specific recommendations as part of the European semester on economic governance. These cover the full range of economic policy from tax regimes to education. Our aim is not to lecture, but to give informed, impartial, independent and dispassionate guidance to the reform process we must all undertake, to ensure that Europe's economy can continue to compete with a world that is rapidly catching us up.

The discussions between Heads of State and Government and their adoption of this year's recommendations made two points clear. First, that everyone sees the importance of the exercise and second, that member states are committed to implementing the Commission's reform recommendations.

Ladies and gentlemen, the need to restructure is not limited to our Member States. At the European Union level we also need to work and reform. First and foremost this applies to the internal market, the world's largest single market and the source of much of Europe competitiveness, growth and prosperity.

Nowhere illustrates the importance of the internal market better than here in Austria. In terms of its trade Austria is among the most open of our economies, almost twice as open to the internal market as the European average. Austria and its citizens have benefited enormously from this. For example, following the last enlargement, exports to the new Member States more than doubled and will increase national income by 0.2% every year for the next decade. Moreover, since its accession Austria has received over 50 billion Euro in foreign direct investment, investment which has helped Austria reach 12th place in the World Economic Forum's innovation ranking.

However, 20 years after its inception the internal market is not complete. A priority must be to strengthen and broaden it to generate further benefits. Last year the Commission adopted the Single Market Act with 12 proposals which are currently before the European Parliament and the Member States. In a few weeks, we will table a Single Market Act 2, to build on this momentum. We are also taking other measures to ensure full implementation of the internal services market worth up to 150 billion a year. This is of particular importance for Austria where two thirds of national income is derived from the service sector and which has a surplus on its trade in services in Europe.

If the internal market is one driver of growth and jobs, then our external market, the rest of the world, should be another. The European Union is the world's largest trader and we are working hard to open up new markets; through free trade area negotiations, including most recently the Commission proposal to move ahead with Japan, through our legislation on public procurement to ensure fairness to the opening of our markets, and through looking at how best to deepen trade and investment ties with other key partners such as the United States. Here, too, Austrian companies, with their high levels of international competitiveness, stand to benefit.

Ladies and gentlemen,

We can consolidate our public finances, we can reform, restructure and create a legislative framework which is conducive to growth and job creation, and we can open markets. But for these benefits to be realised workers and businesses have to have the skills and capacity to take advantage of the opportunities created.

Mr President,

This year's Alpbach economic symposium has focused on the future of social welfare - a highly topical theme. It is particularly important that in the current efforts of adjustment of some of our member states, the core of their welfare system is not dismantled. If we want - and we certainly do - to keep our social market economy we have to reform some aspects of these systems. But not at the price of questioning their principles and achievements.

The current crisis has been particularly difficult for our youth. Across the European Union more than one out of every five youngsters seeking a job cannot find one. In some member states the figure is one in two. Even when they have found jobs 42.5 % of young employees are on temporary contracts.

More than anything these figures demonstrate that the current crisis is not just economic. It has a social dimension which could drive a deeper disconnect between politicians and their electorate, and indirectly also between the EU and its citizens. These broader issues must and will be addressed. One element is to demonstrate even more clearly that our policies can change lives for the better.

Much more must be done to invest in training, better match skills to labour market needs and to shift the burden of taxation away from labour. These measures are no quick fix, but they will ensure that, when growth returns, it is job-rich growth.

The main actions on employment, including youth employment, will of course remain on national level. But to supplement this, the European level can and will also play its part. In the short term the Commission is already using all its instruments and working closely with national governments to combat unemployment.

In the 8 most affected Member States we have re-allocated €7.3 billion of structural funds to support 170 00 SMEs and create over 450 000 jobs. But more needs to be done across Europe as a whole, and we should take inspiration from those Member States that are already, quite literally, "doing a good job", especially for their young people, like Austria. I have very positive memories of my visit, together with Chancellor Faymann, to a youth apprentice workshop in Vienna back in March.

This brings me to the third element, smart targeted investment. At a time when resources for investment are finite we need to invest wisely, strategically and insure the maximum benefits from each euro.

Here I believe that the European Union budget has an important role to play. Ours is a budget for investment, for growth, for our regions, our students, our businesses, our farmers, our unemployed.

Of course in these times of fiscal consolidation it is an easy target. But for a very small budget - just over 1% of EU GDP - it has a significant impact and generates benefits far in excess of its immediate modest cost.

Austria has directly benefited through for example 1.3 billion Euro for its least developed regions between 2007 and next year. Moreover, our support to the accession process of the countries in South East Europe has opened up lucrative markets for Austrian firms. Nor should we forget that Austria has been very successful in winning European research funding with over 1200 successful projects under framework programme VI.

So in short: If our Member States want to be serious about investing in growth and jobs, then an ambitious, targeted and realistic EU budget with added value should be supported. That is vital for our shared European success. It's hard to climb a mountain together if everybody has one hand tied behind their back.

Distinguished guests,

I have sketched the path which we need to follow, not simply to overcome the crisis, but to exit it as a stronger, more united and more competitive Europe; a Europe of sustainable long-term growth; a Europe that enables its people to grow, and that continues its economic and social success in a competitive global environment. This is what we owe to future generations of Europeans, who are so strongly represented in Alpbach.

Ladies and gentlemen,

You might expect a Portuguese to end with a seafaring metaphor. But I will borrow an alpinist quote – after all, the highest peak of Portugal, Mount Pico in the Azores, reaches an astonishing 2351 metres. And I know that because I climbed it. It was part of my campaign to become Prime Minister.

The great Tyrolean mountaineer Peter Habeler has said of his famous ascent of Everest without oxygen that his was not a victory over the mountain - it was a victory over himself! And it was achieved not through finishing the journey but by taking the first steps. This is true, but I think we can all agree that he also demonstrated great courage and resolve not just in starting his journey but in successfully completing it.

That is exactly what we need for Europe: to complete our work, to complete the economic and monetary union, to be determined and consistent, to stay the course, not to expect miracles, but to focus on implementation and results. Step by step. But always with the broad horizon in mind.

Europe's path is clear and like Peter Habeler we are pressing on with determination. But again, much hard work is needed at the European level and nationally if we are to walk it successfully and continue our European journey together.